PART THREE:  The Good

This is the third and final part of a three part series on how to survive and thrive in cannabis 2022. Following the theme and characterizations of the classic 1966 western, The Good, The Bad, and The Ugly, we first introduced the Ugly and the Bad and are now moving on to The Good.

Clint Eastwood’s character in the movie, labeled “The Good” by the film, called “Blondie” for some enigmatic reason by Eli Wallach’s Ugly character, but, in reality, a mysterious character with no confirmed name, is introduced last. He is revealed to be the person who cuts the hangman’s rope around Wallach’s neck with a carefully aimed rifle shot, earning them equal shares of the reward money. The symbolism of that role is another reason the Good, Bad and Ugly paradigm fits with this update on how to survive and thrive in the cannabis industry in 2022.

Hiring a Compliance “Yes man”

One of the “Bad’s” that we talked about in part two was the continuing issue of regulatory complexity. Cannabis companies will continue to have to invest in legal assistance to ensure compliance with regulations, especially companies that operate in more than one state. Many legal compliance practitioners have been trained to always look for roadblocks and prohibitions.  Their job is to say “no” and tell company leadership what they can’t do.  This makes sense, given that while cannabis laws are written to legalize operations they also provide limits, controls, and requirements that companies have to abide by.  But the instinct to focus on the “no” is seriously counterproductive.

In order to survive and thrive, what most companies really need is a rope cutter. They need an advisor who asks salient questions about intent and goals, digging toward potential ways to say “yes”.  If you have a marketing, or product, or process, or system idea that will help your company’s revenues or operational performance, your compliance advisor needs to be looking for ways to help you accomplish those gains and cut through those regulatory ropes. They should not merely be looking for ways to kill your ideas. 

To borrow another movie concept, cannabis companies need to find and hire more of a “yes man” like the movie of that name starring Jim Carrey. If you find the right yes man, it will feel like you just hired Clint Eastwood to cut the compliance rope around your neck, for which there will be a cut of the rewards.  And if the theme of the Forbes article is to be believed, this is one of the most crucial parts of being successful in cannabis.

“The Culture” versus “The Chads”

Although it can also be a bad thing, the true believer culture of cannabis is another rope cutting force for the industry.  Folks who are part of the culture of cannabis are full of positivity, reassurance, and confidence and find it impossible to believe that there isn’t a way to succeed.  These are the very same people that fought for decades to finally get even state level victories that quickly pushed open the door to more.  They are probably the single biggest Good in the industry.

With one very unfortunate exception.  The cannabis culture hates the “Chads”, where “Chad” is a suit wearing corporate type that they fear are coming in with no understanding or appreciation for the industry, or for the plant, or for all of the efforts that have gone into creating the industry in the first place.  Chads are the money men; the corporate raiders of the industry. The ones that buy out OG growers and producers by investing copious amounts of capital to produce products cheaper and faster. Ask someone who has been in the industry since before it was legal and it’s a good bet they will tell you that the “Chads” are killing cannabis.

Except that’s not entirely true. While there are some Chads in the industry who are only here for what they think will be a quick profit, others understand that building an industry to truly reap outsize rewards takes time, dedication, and an appreciation for expertise.

For a company to grow and thrive, it needs capital for growth.  The Chads are going to be the ones that fund the kind of research and development that will help cannabis overcome the user adoption chasm.  They represent the business prowess that will push cannabis mainstream.  And, in my relatively short tenure in the industry (going on 5 years), I also have to say that not every so-called “Chad” is actually a Chad.  Several of the folks that have a Chad’s business eye of the tiger also have an OG’s peace of the culture.  It’s time that the culture worked on finding ways to direct the mercenary energy of the Chads.  Teaming up is not the end of the industry.  It’s the beginning of the mainstreaming of the industry.

One last way to look at the case of Culture vs. Chad is to consider almost every rock band that ever became hugely popular with a string of hit records and songs and sold-out dates at stadium sized venues.  Their commercial success is almost always hated by the original true believers, the same people who say, “yeah – I liked their early work but they totally sold out.”  Except that rock stardom and the mainstream success of cannabis are the same basic thing. In order for cannabis to achieve rock stardom, it will almost inevitably have to embrace the support of a few Chads (i.e., record company execs).

Leveraging “Legal Collusion”

Getting OG’s and Chads to work together brings us to another way to cut ropes. If you look up the word “collusion” in the dictionary the definition contains the negative connotation that you probably had in your head the minute you read the word. The positive, feel-good words that mean the same thing but without the connotative baggage are sunshiny happy words like “cooperation” and “partnering”. 

But with all of the regulatory and tax cards stacked against success in this industry, keeping some of the “illegal imagery” might be a good thing. I think that taking the root part of the word’s definition, “cooperation within an industry for mutual benefit”, and then avoiding the illegal aspects that we’re told come with that (e.g., price fixing, anti-competitive behavior, etc.), means that doing some “legal collusion” is a better fit with the continuous battle for legitimacy and survival that defines the cannabis industry. So let’s talk about how participants in the cannabis industry can participate in some “legal collusion”.

Collusive Data to Unlock User Success and Adoption

For the Big Bad user adoption chasm, one of the first forms of “collusion” that I would advocate is data sharing.  We’re not talking about sharing data that violates customer privacy or leads to price fixing or other anti-competitive behavior.  We’re talking about data sharing that helps to increase understanding about what products work and don’t work for what to improve every companies’ ability to make recommendations.

This kind of collusion can help form a bridge to the mainstream market. Capture data about customers and what they are trying to achieve or overcome. Gather feedback about what actually worked. Cleanse that data to protect people’s privacy and then share it. The culture of the industry is one of the most open and supportive regarding what results can be achieved with the plant. Actively colluding to leverage that Good and cutting the ropes of unnecessary competition that actually hinder the industry as a whole is an overall positive that should be totally achievable.

Industry Organizations and Groups

One of the ways to get this done is with another collusive concept: industry organizations and groups. Everything is not about legislation or regulation or legalization.  It also needs to be about sharing successes and failures.  Helping each other to be successful in spite of the oppressiveness of the regulation and taxation of the industry.  Developing more industry standard messaging about how to determine what product works best for various effect. Working together to tie that back to test results, helping to break the irrational market control of THC% in favor of a more inclusive understanding of all of the active compounds in the cannabis plant. THAT is the kind of good, legal collusion that the industry needs a lot more of, and SHOULD be the kind of collusion for which the culture of cannabis can lead the way.

Business Partnerships and Joint Ventures

Partnerships and joint ventures, sourcing deals and agreements — these are also ways to legally collude to build success.  Work with others and form those arrangements.  Provided you are not pushing people out of the business or creating patently unfair pricing, reducing competition, or otherwise harming the industry, you are colluding positively by figuring out ways to survive and help build the industry.

Exit Buy-Out Clusters

Many of you will also reach the point where you are looking for an exit from your current venture, possibly to start a new, different one, and possibly to move on to something else or to successfully retire.  When you do, you need to keep in mind that the larger companies with the capital to acquire your business aren’t exactly interested in buying out individual small companies. They are making big purchases, one after the other.

One way to legally collude to make your company attractive to these big company buyers is to create what I would call a “buy-out cluster”.  Finding other business owners that are also looking to exit their businesses and then assembling a package of businesses that will be more attractive to the larger players in the industry is “collusive”, but not illegal.  

Of course, creating a “buy-out package” of companies can be tricky.  It may also involve degrees of readiness.  One business owner might be looking for an exit now, while others are able or want to hang on longer.  If you can find other folks with similar timelines and attractive combinations of assets, though, providing a larger company with the ability to buy many companies in a single or grouped transaction may make you a more attractive target and help you achieve an exit sooner. 

This is also another way that the industry groups could assist.  By finding a professional advisor to work with an industry association, that advisor can work through the association to assemble groups of companies that are complementary, have a similar exit timeframe, and that, taken together, make an attractive target for the larger, more acquisitive companies.

Working together to help each other be successful in this challenging industry is something that can and should be possible for the culture of cannabis.  While I am sure there are other ways for participants to “legally collude”, you get the idea.

Conclusion

Cannabis is an amazing, fast paced industry that has plenty of challenges.  Some of those challenges are ugly, and some are downright bad.  But it’s also an industry with a lot of good. The positivity and potential for the industry is incredible, and, if you can cut the right ropes, then, like Clint Eastwood at the end of the movie, you can also ride away with your full share of the gold.

Please feel free to reach out for more information about any of the concepts shared in this series.  Realize that this is a very high level overview of each topic and the devil is always in the details, but Navvee would be happy to assist any way we can.